DR Horton Inc (DHI)
Cash conversion cycle
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 312.76 | 344.03 | 302.27 | 290.55 | 300.12 |
| Days of sales outstanding (DSO) | days | — | — | — | — | — |
| Number of days of payables | days | — | — | — | — | — |
| Cash conversion cycle | days | 312.76 | 344.03 | 302.27 | 290.55 | 300.12 |
September 30, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 312.76 + — – —
= 312.76
The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It is a critical metric for assessing how efficiently a company manages its working capital. I will analyze D.R. Horton Inc.'s cash conversion cycle based on the data provided.
The trend in D.R. Horton Inc.'s cash conversion cycle over the past five years shows some fluctuations. In 2023, the company's cash conversion cycle decreased to 298.77 days from 326.22 days in 2022, indicating an improvement in the efficiency of its working capital management. This could suggest that the company has been able to accelerate the conversion of its investments in inventory and other resources into cash flows from sales more effectively compared to the previous year.
However, looking at the longer-term trend, the cash conversion cycle has shown some variability. In 2021, the cycle increased to 284.14 days from 273.20 days in 2020, before decreasing again in 2022. This fluctuation could be indicative of changes in the company's operating environment, strategic initiatives, or supply chain factors that have impacted its working capital efficiency.
The relatively stable but elevated levels of the cash conversion cycle observed over the years, with the cycle consistently hovering around 280-330 days, suggest that D.R. Horton Inc. may face challenges in optimizing its working capital management. A high and fluctuating cash conversion cycle can tie up funds in working capital, potentially impacting the company's liquidity and overall financial performance.
In conclusion, while there is evidence of short-term improvement in D.R. Horton Inc.'s working capital efficiency, the company's cash conversion cycle has shown notable fluctuations over the years. This indicates the need for the company to address and potentially streamline its working capital management processes to achieve more consistent and efficient cash conversion cycles in the long term.
Peer comparison
Sep 30, 2023